Are You Still Investing in Long Bonds?

Complacency is a dangerous foe to a successful investment program. After one of the least volatile years on record in the stock market, many equity investors are complacent today. Though it is discussed much less, so are bond investors.

Long bonds are the dog that never seems to bite, but that doesn’t mean they aren’t dangerous. As the WSJ describes here, some investors don’t seem to mind the danger of bonds.

The latest pillar supporting the U.S. Treasury market: everyday investors.

Ordinary investors are a growing force keeping longer-term bond yields low, even as the Federal Reserve has raised interest rates. They are helping cap borrowing costs for individuals, corporations and state and local governments, while boosting the appeal of riskier assets such as stocks, which have climbed to record after record in recent months.

John Nederhiser exemplifies the current crop of bond buyers. While professional money managers fret about interest-rate increases, rising budget deficits and inflation, the 58-year-old accountant in Gresham, Ore., said such concerns won’t deter him from continuing to add to his fixed-income holdings.

We’ve been hearing about this for 10 years and it hasn’t happened,” said Mr. Koparkar, 66, a retired consultant in the biotech and pharmaceutical industries. He and his wife, Sunita, 59, who works in research and development in biotech, plan to continue investing in bond mutual funds and exchange-traded funds. “I have not changed my strategy,” he said.

Jeremy Jones, CFA

Jeremy Jones, CFA is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Jeremy is a contributing editor of youngresearch.com.